DOJ announces indictment of Russian national in fraud scheme

According to an announcement posted by the Department of Justice (DOJ) Wednesday, a $4 billion Bitcoin money laundering scheme has been shut down and its leader arrested as the result of multi-national cooperation with the U.S. Justice Department.

Russian national Alexander Vinnik, 37, owner and operator of multiple BTC-e accounts since 2011, was arrested in Greece on Tuesday. BTC-e is reportedly one of the largest digital Bitcoin exchanges and was operating illegally by not requiring users to confirm their identity, thus, processing anonymous transactions.

Vinnik is accused of pulling in multiple deposits directly into his own personal bank accounts, using the exchange to launder billions of dollars for others and to aid in drug trafficking, hacking, and identity theft.

Vinnik was also a primary beneficial owner of BTC-e’s managing shell company, Canton Business Corporation, the DOJ reported.

BTC-e did “substantial” business in the United States, but was not registered as a money service business with the U.S. Department of Treasury and had no anti-money laundering program in place, as required by federal law.

The Justice Department reported that a grand jury in the Northern District of California has indicted Vinnik on charges of operating an unlicensed money service business, money laundering, and related crimes.

“Mr. Vinnik is alleged to have committed and facilitated a wide range of crimes that go far beyond the lack of regulation of the bitcoin exchange he operated. Through his actions, it is alleged that he stole identities, facilitated drug trafficking, and helped to launder criminal proceeds from syndicates around the world,” said Chief Don Fort, IRS Criminal Investigation. “Exchanges like this are not only illegal, but they are a breeding ground for stolen identity refund fraud schemes and other types of tax fraud. When there is no regulation and criminals are left unchecked, this scenario is all too common. The takedown of this large virtual currency exchange should send a strong message to cyber-criminals and other unregulated exchanges across the globe.”

“The arrest of Alexander Vinnik is the result of a multi-national effort and clearly displays the benefits of global cooperation among US and international law enforcement,” said FBI Special Agent in Charge Hess. “This investigation demonstrates the long-term commitment given to identifying and pursuing criminals world-wide with a whole of government approach. This was a highly complex investigation that has only reached this stage due to the persistent and dedicated efforts of all the parties involved. We must continue to impose real costs on criminals, no matter who they are or where they attempt to hide.”

Vinnik faces huge penalties if convicted in all of the charges, including up to 20 years imprisonment for money laundering and other charges.

“We will hold accountable foreign-located money transmitters, including virtual currency exchangers, that do business in the United States when they willfully violate U.S. AML laws,” said Acting FinCEN Director Jamal El-Hindi. “Today’s action should be a strong deterrent to anyone who thinks that they can facilitate ransomware, dark net drug sales, or conduct other illicit activity using encrypted virtual currency. Treasury’s FinCEN team and our law enforcement partners will work with foreign counterparts across the globe to appropriately oversee virtual currency exchangers and administrators who attempt to subvert U.S. law and avoid complying with U.S. AML safeguards.”

The U.S. Internal Revenue Service, Department of Homeland Security, Homeland Security Investigations, FBI, U.S. Secret Service Criminal Investigative Division and Federal Deposit Insurance Corporation, and Office of the Inspector General were all involved in the investigation. The U.S. Attorney’s Office for the Northern District of California and the Criminal Division’s Computer Crime and Intellectual Property Section are prosecuting the case.

Recently, when announcing the largest takedown of healthcare fraud in the nation’s history, Attorney General Jeff Sessions vowed, “We are sending a clear message to criminals across the country: We will find you. We will bring you to justice. And, you will pay a very high price for what you have done.”

Sessions and Department of Health and Human Services Secretary Tom Price announced at a press conference the conclusion of a massive takedown operation by the Medicare Fraud Strike Force, involving $1.3 billion in fraudulent Medicare and Medicaid billings.

According to that DOJ press release, the takedown was described as the largest in the history of the Department of Justice, with charges being brought against 412 defendants across the nation, including 115 doctors, nurses and other licensed medical personnel. As a result of the investigation, the HHS department has suspended or banned 295 health care providers from participating in federal healthcare programs.

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